Proximate Cause

What Does Proximate Cause Mean?

Proximate cause refers to the direct cause of a loss, without which the loss would not have occurred. It is a crucial principle in the insurance industry. For an act or event to be considered a proximate cause, it does not have to immediately precede the loss or trigger a chain of events leading to it. Establishing the proximate cause is essential in determining whether coverage applies and whether liability can be assigned to the negligent party.

Insuranceopedia Explains Proximate Cause

In property insurance, establishing the proximate cause is crucial when more than one peril contributes to a loss. Since policies may exclude certain perils, if the peril deemed the proximate cause is not covered by the policy, the insurer is not obligated to pay out benefits. Conversely, if the proximate cause is covered, the insurer would provide the necessary compensation.

In liability insurance, if the negligent act of one party is determined to be the proximate cause of harm to another party, it forms the legal basis for holding the responsible party liable. Liability insurance would cover the defense costs and any damages awarded to the plaintiff.